Determinants of credit ratings: evidence from panel discrete model

Authors

DOI:

https://doi.org/10.17811/ebl.9.3.2020.240-247

Abstract

This study aims to explore how changes in explanatory variables may affect the probability of sovereign credit ratings assigned by Fitch, which is assumed to be a binary choice variable. For this purpose annual data of selected developed and developing countries for the period 2000-2016 have been used. All the data have been collected from World Bank database and Fitch website. In the empirical analysis the binary logit model has been applied. It can be concluded that the determinants of sovereign credit ratings can help sovereigns to better understand the drivers of their credit rating.

Author Biography

Zamira Oskonbaeva, Kyrgyz-Turkish Manas University

Asst. Prof.Dr. Economics Department

References

Alexe, S. Hammer, P. L., Kogan, A., and Lejeune, M.A. (2003) A Non-Recursive Regression Model For Country Risk Rating, Rutcor Research Report 9, Rutgers Center for Operational Research, March.

Archer, Candace C., Glen Biglaise, and Karl DeRouen Jr. (2007) Sovereign Bonds and the Democratic Advantage: Does Regime Type Affect Credit Rating Agency Ratings in the Developing World? International Organization: 61, Spring, pp. 341–365.

Afonso, A. (2003) Understanding the determinants of sovereign debt ratings: evidence for the two leading agencies, Journal of Economics and Finance, 27 (1), 56-74.

Afonso, A.; Gomes, P. and Rother, P. (2007) What ‘hides’ behind sovereign debt ratings? European Central Bank Working Paper 711.

Afonso, A., Gomes, P., and Rother, P (2009) Ordered response models for sovereign debt ratings, Applied Economics Letters, 16 (8), 769-773.

Afonso, A., Gomes, P., and Rother, P. (2011) Short and Long-run Determinants of Sovereign Debt Credit Ratings, International Journal of Finance and Economics, 16(1), 1-15.

Bissoondoyal-Bheenick, E. (2005) An analysis of the determinants of sovereign ratings. Global Finance Journal, 15(3), 251-280.

Butler, A. W., and Fauver, L. (2006) Institutional Environment and Sovereign Credit Rating, Financial Management, 35 (3), 53-79.

Bozic, V., and Magazzino, C. (2013) Credit Rating Agencies: The Importance of Fundamentals in the Assessment of Sovereign Ratings, Economic Analysis and Policy, 43 (2), 157–176.

Brůha, J., Karber, M., Pierluigi, B., Setzer, R. (2017) Understanding sovereign rating movements in euro area countries, European Central Bank Working Paper Series, No 2011.

Cantor, R. and F. Packer (1996) Determinants and impact of sovereign credit ratings, Economic Policy Review, 2, 37-53.

Chee, S.W., Fah, C.F., and Nassir, A. M. (2015) Macroeconomics Macroeconomics Determinants of Sovereign Credit Ratings, International Business Research; 8(20), 2-50.

Eliasson, A. C. (2002) Sovereign credit ratings, Working Paper No. 02-1. Deutsche Bank Research.1-23.

Fitch, (2017). https://www.fitchratings.com/site/home erişim tarihi 01.06.2017.

Greene, W.H. (2011) Econometric Analysis – 7th Edition, Prentice Hall.

Güriş S. (2015) Stata ile Panel veri Modelleri, Der Kitabevi Yayınevi, İstanbul.

Gültekin Karakaş, D., Hisarciklilar, M., and Öztürk, H. (2011) Sovereign Risk Ratings: Biased Toward Developed Countries?, Emerging Markets Finance & Trade , (47), 69–87.

Haque, U. N., Mark, N. C. and Mathieson, D. J. (1998) The Relative Importance of Political and Economic Variables in Creditworthiness Ratings (April 1998). IMF Working Paper, pp. 1-13, 1998. Available at SSRN: https://ssrn.com/abstract=882300

Kraft, P. (2015a) Do Rating Agencies Cater? Evidence from Rating-based Contracts. Journal of Accounting and Economics, 59, 264–283.

Kraft, P. (2015b) Rating Agency Adjustments to GAAP Financial Statements and their Effect on Ratings and Credit Spreads. The Accounting Review, 90, 641–674.

Larrain G., Reisen H. and von Maltzan J. (1997) Emerging Market Risk and Sovereign Credit Ratings. OECD Development Center, 1-30.

Mellios, C., and Paget-Blanc, E. (2006) Which Factors Determine Sovereign Credit Ratings? The European Journal of Finance, 12(4), 361–377.

Mulder, C., and Perrelli R. (2001) Foreign Currency Credit Ratings for Emerging Market Economies:IMF Working Paper 01/191, November 2001 (Washington: International Monetary Fund).

World Bank, (2017) http://data.worldbank.org/country/ (25.05.2018)

Downloads

Published

13-12-2020

How to Cite

Oskonbaeva, Z. (2020). Determinants of credit ratings: evidence from panel discrete model. Economics and Business Letters, 9(3), 240–247. https://doi.org/10.17811/ebl.9.3.2020.240-247